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London yields drop

The rental yields that landlords obtain in London have continued to fall, new figures suggest.

Figures from Landlord Mortgages indicate that rental yields in the capital dropped from 5.96 per cent in the first quarter of the year to 5.39 per cent in the second.

The research suggested that London yields had dropped because more people were being attracted to invest after being enticed to the capital because of its rising house prices.

However, Landlord Mortgages suggested that these investors had not taken into account the price competition that this demand caused.

"The huge City bonuses this year have led to a surge of buy-to-let in the capital, pushing prices up in this area, as investors choose to purchase their buy-to-let property close to home," Lee Grandin, managing director of Landlord Mortgages, explained.

"This concentration of investment has caused a great increase in capital appreciation in London.

"This explains why London experienced a greater drop in yields than other regions this quarter."

Despite this, recent figures from the Mortgage Trust suggest that many landlords still expect to increase the size of their property portfolio over the coming five years.

"As landlords begin to increase their rents, in line with the value of the property, we expect to see rental yields pick up again - hopefully by the end of the year," Mr Grandin concluded.